Correlation Between Fresenius Medical and Charter Communications

Can any of the company-specific risk be diversified away by investing in both Fresenius Medical and Charter Communications at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Fresenius Medical and Charter Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fresenius Medical Care and Charter Communications, you can compare the effects of market volatilities on Fresenius Medical and Charter Communications and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Fresenius Medical with a short position of Charter Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fresenius Medical and Charter Communications.

Diversification Opportunities for Fresenius Medical and Charter Communications

-0.9

Correlation Coefficient

Fresenius Medical  Charter Communications

Pay attention - limited upside

The 3 months correlation between Fresenius and Charter is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Fresenius Medical Care and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications and Fresenius Medical is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Fresenius Medical Care are associated (or correlated) with Charter Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Communications has no effect on the direction of Fresenius Medical i.e., Fresenius Medical and Charter Communications go up and down completely randomly.

Pair Corralation between Fresenius Medical and Charter Communications

Assuming the 90 days trading horizon Fresenius Medical Care is expected to under-perform the Charter Communications. But the stock apears to be less risky and, when comparing its historical volatility, Fresenius Medical Care is 6.81 times less risky than Charter Communications. The stock trades about -0.13 of its potential returns per unit of risk. The Charter Communications is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,009  in Charter Communications on October 8, 2024 and sell it today you would earn a total of  636.00  from holding Charter Communications or generate 21.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Fresenius Medical Care  vs.  Charter Communications

Fresenius Medical Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fresenius Medical Care has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fresenius Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Charter Communications

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Charter Communications sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fresenius Medical and Charter Communications

The main advantage of trading using opposite Fresenius Medical and Charter Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fresenius Medical position performs unexpectedly, Charter Communications can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Charter Communications will offset losses from the drop in Charter Communications' long position.

The idea behind Fresenius Medical Care and Charter Communications pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.